The public expenditure shifts that took place following the discovery of diamonds and gold during the second half of the nineteenth century had far‐reaching consequences for southern Africa’s development.

Using new data for public expenditure and foreign debt in the Cape Colony and evidence from Cape parliamentary budget debates, we trace and explain the growth of the public sector. We find that the coincidence of mineral discovery in 1867 and the granting of responsible government status rapidly accelerated the growth of the public sector. Owing to strong mining interests, railways accounted for more than 70% of the public works expenditure from the 1880s onwards. Spending on human capital and welfare enhancement remained limited. Both the quantitative and qualitative evidence suggests that the mining elites managed to build coalitions that swayed public expenditure decisions towards self‐serving ends.
Using new data for public expenditure and foreign debt in the Cape Colony and evidence from Cape parliamentary budget debates, we trace and explain the growth of the public sector. We find that the coincidence of mineral discovery in 1867 and the granting of responsible government status rapidly accelerated the growth of the public sector. Owing to strong mining interests, railways accounted for more than 70% of the public works expenditure from the 1880s onwards. Spending on human capital and welfare enhancement remained limited. Both the quantitative and qualitative evidence suggests that the mining elites managed to build coalitions that swayed public expenditure decisions towards self‐serving ends.
Abel Gwaindepi and Johan Fourie
South African Journal of Economics
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